InternetRetailing whitepaper in conjunction with Kenshoo | March 2018

HOW AND WHY NATIVE ADVERTISING IS THE

FUTURE FOR MARKETERS IN 2018 AND BEYOND

P4 PART ONE: THE RISE OF NATIVE ADVERTISING P5 THE AMAZON FACTOR P7 FOUR AREAS FOR IMPROVEMENT P10 OUR SURVEY
2 l Kenshoo Whitepaper
GOING NATIVE
INTRODUCTION
The advertising industry is in a state
of upheaval. Giant search and social
media companies dominate the
publishing market. Mobile has overtaken
print, desktops and television as
consumers’ preferred medium. New
channels based on search and social
media have risen fast to dominate the
market. Unprecedented stores of data
increasingly allow companies to tailor
offerings to customers’ desires.
Customers are, in turn, more
demanding. They expect a seamless
experience across multiple channels and
are resistant to established, intrusive
advertising formats.
Brands and retailers are struggling to
respond to this rapid, disruptive change.
The new landscape requires changes to
business models and constant adaption
to rapid innovation and market dynamics.
In her Internet Trends 2017 report,
Mary Meeker noted a rapid blurring of
the lines between ads, content, products
and transactions. The ad, she concluded,
is becoming the digital storefront.
Amid all this change and uncertainty
one medium plays to all the trends
listed here: native advertising. Instead
of the pop-ups advertisers have relied
on for the past couple of decades, native
advertising adapts to the medium it
appears on and is relevant to the user’s
interests. It is particularly suited to a
world where consumers spend more and
more time interacting through various
forms of social media, whether with
friends on Facebook or with ideas and
visuals through Pinterest and Instagram.
Native advertising is paid media
where the advertising experience is well
integrated into the medium on which it
appears. It looks and feels like it is meant
to be there. It is also entirely different
from the crude “advertorial” content
that still appears in print. Search and
social are distinct media that enable the
advertiser to have an interactive, non-
intrusive conversation with the user.
Native was the new buzzword as
recently as 2013. Now, several of the
biggest publishers in search and social
have chosen to make almost 100% of
their advertising native – and native is
predicted to account for 74% of all ad
revenue by 20211. We have moved rapidly
from “new native” – the emergence of
native advertising as the right form for
digital users – to “native first” where
native will become the basis for all
advertising by retailers and brands.
To see how retailers are preparing for
this new era, we conducted a survey of
more than 80 predominantly UK-based
retail professionals. It suggests the
industry is reasonably aware of native
advertising, but not as much as might be
expected given its predicted trajectory.
Respondents were also unsure about
how to adapt to the changing market.
The key figures are presented towards
the end of this whitepaper.
We will offer evidence to show how
native will soon become the dominant
form of advertising and shed light on
whether advertisers are ready for this
shift. Things are moving fast but there
is still time to catch up with the move to
native. We will highlight four areas for
improvement in 2018, which promises
to be a year when the impulse to go
native will grow stronger.
SEAN FARRELL
Editor, InternetRetailing
1.
Business Insider research June 2016

FROM OUR SPONSOR
The switch to digital media consumption
triggered by the mobile revolution
presents a huge opportunity and
significant challenges for marketers. Our
use of mobile phones for virtually every
aspect of our lives means consumers are
glued to a medium that is always on. But
consumers have more power to reject
ads that don’t interest them and are less
accepting of irrelevant ads popping up as
they conduct their lives.
Mobile is inherently personal to the
owner of the device. Content and ads
must start with the end-user experience
in mind. Advertising that flows within the
stream of the content that the user has
chosen will engage that user. Pop-up
banners that interrupt the content won’t.
Digital consumers are also warier of
artificial images and fake messages.
They want authenticity and value trust. To
build trust, brands have to engage with
consumers in real, honest and relatable
ways by showing an understanding of the
individual needs of the customer during
various stages of the shopping journey.
Honing your advertising strategy
to the most popular online destinations
is critical to success when a handful
of media dominate users’ time.
US consumers spend an estimated
50 minutes a day on Facebook platforms.
This is more time than people spend
exercising, and is nearly as much time
as people spend eating and drinking.
These trends have made native
the category of advertising where
marketers will win or lose in keeping
up with the consumer. All of the most
influential platforms in the world connect
with their audiences natively in-feed
such as Facebook’s carousel ads,
Amazon’s sponsored products, Pinterest’s
search ads, Snapchat’s snap ads, and
Google or Bing’s shopping ads. When
Kenshoo Whitepaper l 3
GOING NATIVE
it comes to marketing, we are now in a
native-first world.
It has become increasingly difficult
for a marketer to be quick enough to
engage with consumers throughout
their journeys. Nevertheless, Kenshoo’s
marketing technology can help brands
engage consumers along the entire
shopping journey based on behaviour,
interests and characteristics by:
• Offering custom-tailored business
goals that can be applied across
disparate publisher platforms
• Offering flexible campaign structures
with dynamic management of publishers
and ad formats
• Capturing real-time consumer interest
and intent signals across publishers
• Enabling high-speed budgeting
allocation and bidding decisions based
on optimising for the next incremental
portion of spend
• Providing efficient mechanisms to scale
routine, yet critical, campaign tasks
• Offering an open platform that allows
for efficient data sharing (input and
output) across the organisation
At Kenshoo, our goal is to help you
overcome the challenge of bringing
major platforms together and optimising
at scale to create a seamless story that
influences the consumer along their
buying journey – driving increased
engagement, revenue and lifetime value.
Michelle Urwin
EMEA Marketing Manager, Kenshoo
4 l Kenshoo Whitepaper
GOING NATIVE
PART THE RISE OF NATIVE
ONE: ADVERTISING
What has happened to make native the
dominant form of advertising of the
near future? Put simply, the coming
together of several seismic shifts
has transformed native into the ideal
form for a world in which increasingly
empowered, savvy consumers conduct
their lives on mobile devices. The
two key elements to this revolution
in behaviour are search and social.
When deciding what to buy, we now
start off not with a visit to the high
street but by scoping the net for ideas,
recommendations and the best prices.
The explosion of social media means
we are conducting our relationships as
well as our consumption online through
platforms such as Facebook, Instagram
and Snapchat. Although Facebook
dominates the market now, the newer
social players will grow in importance.
The enabler of these twin trends is the
smartphone. We don’t have to wait to
get to a desktop or a laptop to check out
a product or interact online. Everything
is to hand on a device that has
transformed the way we spend our time
– to the point where for many people
their phone is almost an extension of
their being.
Advertisers are responding to this
shift. In the fourth quarter of 2017, for
example, mobile (smartphone-only)
spending on both social and search
outpaced desktop, driving mobile share
to 76% of social and 44% of search1. But
to succeed in the digital world requires
new thinking that cuts across different
areas of the business (as we show in
the diagram on the right here, and we
explore in this whitepaper).
It’s new thinking that begins by
understanding that, because digital
activity has become fundamental to
who we are, we are no longer willing to
accept intrusive, random pop-up ads.
What might have felt like a minor irritant
on a desktop feels like a violation on our
phones. This impulse is especially true of
millennials and post-millennials. These
young consumers like buying stuff but
they hate advertising – or at least the
in-your-face variety. They want more
“authentic” content that feels like the
content they choose to interact with.
The switch to digital life has put
enormous power and knowledge at the
disposal of the big search and social
media companies. Google, Facebook,
Pinterest and other digital leaders have
unprecedented troves of real-time data
about our interests and short-term
desires. These publishers can target
HOW TRADITIONAL ONLINE
ADS ARE LOSING OUT
 
Procter & Gamble cut its ad spending by
an estimated $140m in the second
quarter of 2017 with no perceptible
damage to sales: organic revenue
rose 2% in the quarter. The company
said it had stopped spending in areas
where the placement of ads didn’t
serve its products and was working
to produce ads that made consumers
“think, talk, laugh, cry, smile, act and
of course buy”.
 
JP Morgan cut the number of sites
its ads appear on to 5,000 from
400,000 in 2017 with no impact on
performance metrics. All the sites it
uses now are pre-approved instead
of being selected by automated
tools. The move was partly driven
by a desire to ensure the bank’s
brand was not sitting with offensive
material – a risk when volume
takes precedence over targeted,
thoughtful content.
 Kenshoo Whitepaper l 5

GOING NATIVE

us with pinpoint ads that fit seamlessly TAKING PERFORMANCE MARKETING UP A GEAR
with our interests and the platform they
SOURCE: KENSHOO
appear on. In the digital world, a dozen
or so cash-rich platforms dominate
RETHINKING CHANNELS
compared with thousands of old media
companies. This allows them to invest
1
heavily in innovation to optimise the ads
they offer us, driving transformative
RETHINKING CREATIVE
trends, and the capacity to capitalise on
these by adapting and testing.
2
Lives led online, the ubiquity of
visually led smart devices, the quest
RETHINKING IMPACT (SUCCESS)
for authenticity, unprecedented stores
of information, the concentration of
3
publishing power, innovation and the
merging of search and social: this is the
RETHINKING TECHNOLOGY
cocktail of user demand and publisher
capacity that will lead native advertising
4
to become dominant in the near future.
The rise of native advertising will gather momentum in 2018. Focusing on
1.
Kenshoo Digital Marketing Snapshot, Q4 2017 these areas will help retailers to be at the forefront of a changing market

THE AMAZON FACTOR

There’s a new player in the native
market – and it’s one that is impossible
to ignore. In a short space of time since
opening up its advertising to marketers,
Amazon has established e-commerce
as the third pillar of native advertising
alongside search and social.
Amazon presents a big opportunity
for brands because it combines three
powerful functions: it’s the world’s
third-biggest retailer, but it’s also a
marketplace and a content company.
Consumers routinely use Amazon, with
its vast array of products, user reviews
and suggestions, to compare products
and prices - as well as, of course,
making a final purchase.
Amazon does not publish figures
for its advertising business, but it is
growing fast and brands and retailers are
responding to this.
Amazon Marketing Services sells
advertisements through sponsored
headline search and product display
ads1.. Its growth in advertising is driven
by products and data. When
a consumer searches on Amazon
they tell it what they are looking
for and Amazon responds. The key
considerations here are:
6 l Kenshoo Whitepaper
GOING NATIVE
Keywords – focus on the product and
use Amazon’s automated campaigns to
see which searches drove clicks, sales
and activity.
Product-driven – work hard to
understand which products are
performing well by using data
Bidding – be aggressive in bidding for
your keywords, especially at peak times
Budgets – continually review your budget.
Expect growth in demand and make sure
your budget reflects that
Amazon is fertile ground for native
advertising. People go to Amazon
to shop so they are receptive to
suggestions. But ads have to be
engaging to stand out in the crowd.
Amazon is a big opportunity but it is
highly competitive. Brands and third-
party retailers, large and small, compete
on a fairly level footing. If an ad doesn’t
perform well it disappears, requiring
regular adaptation.
Brands and retailers are waking up
to the opportunity – and the downside
of not getting involved. Being there
to compete is a prime motivation for
going native on Amazon. For brands
and retailers that question whether they
should sign up with Amazon even though
their own websites are doing well, the
answer is yes.
1.
Kenshoo does not currently support product display.
HOW NATIVE IS GROWING
Belk, the US department store chain,
tested whether Pinterest Promoted
Pins would drive sales. The results were
that converters were twice as likely to
have seen a Pinterest ad, there was an
observed increase in revenue and this lift
continued 30 days after the campaign.
Belk has made Pinterest part of its
marketing programme.
Vistaprint wanted to create and edit
Facebook ads more quickly and
efficiently with better targeting and data.
Kenshoo’s streamlined ad creation flow
enabled Vistaprint to publish engaging
video and link posts quickly. Targeting
improved and better performance
measurement reduced cost per click
and hit goals for acquisition costs. Clicks
and impressions rose 182% and 568%
respectively and return on ad spend
is also now below target.
 
Retailers advertising on Pinterest in the US have
faced challenges hitting targets and
scaling activities because Pinterest’s
auction works differently from those
of other publishers. Ad agency PMG
enlisted Kenshoo to provide insight and
liaise with teams at Pinterest. The result
was a 50% outperformance in click-
through rates and costs per click 30%
lower than target.
Performics@Starcom’s CPG client has a
growing e-commerce program featuring
a myriad of products across multiple
brands on Amazon. Harnessing the
power of Kenshoo eCommerce,
Performics@Starcom’s team yielded
a 28% jump in ROI, a 13% increase in
conversions, a 32% decrease in CPA,
and a 23% decrease in CPC across its
campaigns.

FOUR AREAS FOR
IMPROVEMENT
This whitepaper appears at the start of
2018 – a year when native advertising
will gain further momentum. The
market is moving fast but there is plenty
of opportunity to be at the forefront. The
transformation of native from a talking
point to something unignorable has left
even big players playing catch-up.
Predictions for native and non-
native publishers are stark. Forrester
estimates search and social will add
about $20bn in revenue between 2017
and 2020, while traditional display will
add just $1bn.
Here, we will discuss four areas
for adaptation and improvement to
capitalise on the move to native. At the
heart of this shift is the emergence of
channels that are changing the way
consumers behave, and are equipped
with information and innovative capacity
that were beyond the scope of traditional
publishers.
To be successful in native advertising,
you have to adapt your creative content
to the new visual world of smart devices.
This means producing engaging content
that draws the user in. Doing this also
means reorganising your business
across channels and producing creative
content that gives consumers an
engaging, seamless experience.
Our survey (for more on the results,
see page 10) suggests retailers aren’t
prepared for this new world or taking
it seriously enough. On a scale of
1-10, respondents saw little value in
integrating across channels (4) and
attached a low priority to doing so
(3). Activity was also heavily weighted
towards the big two channels, Google
and Facebook.
CHANNELS
Consumers’ transition to digital has
transformed the environment for
advertising channels over the past
Kenshoo Whitepaper l 7
GOING NATIVE
decade. Where traditional media
featured multiple large players with
a tail of thousands of publishers and
broadcasters, the digital market is
dominated by a handful of platforms with
enormous power and financial muscle.
Here are five key differences resulting
from this change:
1. Advertising in traditional media was
based partly on guesswork. For digital
platforms that is no longer true. They
know what interests us because our
activity tells them.
2. Traditional media had very little
information about their customers.
By contrast, new publishers have
benefited from the explosion of data
in the past few years that has allowed
them to gather valuable troves of
insight.
3. The concentration of power and
income in the hands of a few publishers
is enabling innovation on a scale that
was impossible for even the biggest
players in old media. This innovation is
made available to brands that choose to
advertise on these platforms.
4. Digital publishers have a direct
relationship with the advertiser instead
of going through a third party, allowing
a two-way relationship that helps you
produce content that works. These
publishers are able to cut down on ad
fraud and blocking because they control
the process.
5. Traditional media used banner ads
and pop-ups that interrupted the user’s
experience. This didn’t matter too much
on a computer. New platforms based
on search and social on digital
devices are suited to more engaging,
conversational content.
8 l Kenshoo Whitepaper
GOING NATIVE
TECHNOLOGY
In a world conducted online,
technological innovation is a key feature
of the rapidly changing landscape and a
source or competition between the big
digital publishers.
Here are four technologies that could
revolutionise the market:
1. Visual search has arrived. After
faltering progress over the past few
years, the ability to search based on an
image has come of age in the form of
Pinterest Lens. The technology’s stated
aim is to let you “find all those things
you don’t have the words to describe”.
Earlier versions of visual search would
take a picture of a red chair and suggest
other red chairs. Pinterest Lens draws
on Pinterest’s huge data reserves to
suggest chairs and other items based
on the style and design of the chair,
giving a richer range of options. Now,
other companies such as Google and
Bing are working on similar technology.
Visual search is a big opportunity for
retailers and brands to reach consumers
actively looking for purchase ideas.
Well-judged native advertising is the
ideal way to engage these consumers
and put products on their list of options.
Recent figures for ad expenditure suggest
companies are beginning to understand
this idea. In the fourth quarter of 2017,
video ad spending increased 93% year
on year (YoY), accounting for 25% of total
social spending. Instagram ad spending,
meantime, increased 183% YoY, while
driving almost four times as many clicks.2.
2. Just as the smartphone sparked a
revolution in consumer behaviour, the
move to a screenless world promises
to disrupt the market again. Voice
search using a digital assistant isn’t as
immediate a priority for advertisers as
visual search but retailers and brands
should be thinking hard about it. Users
of voice-activated digital assistants
such as Amazon’s Alexa and Microsoft’s
Cortana will grow to 1.8bn in 2021 (from
390m in 2015), according to Tractica;
half of all searches will be by voice in
2020, comScore predicts. As consumers
search for information and products
through a continuing dialogue with their
assistants, it will be ever more important
for ads to be targeted and seamless,
and for advertisers to take the long
view by maintaining conversations with
consumers to understand their needs.
3. A more immediate big development
in search will be chat. A year or so ago,
everyone was talking about chatbots
but their limitations have since become
apparent. In 2017 Facebook scaled back
its efforts after reportedly finding bots
only succeeded 30% of the time – so you
don’t need to build a bot. But the
potential demand is there. More than
half (53%) of French and British
consumers who use mobile messaging
apps have interacted with a company
through mobile messaging or are open
to doing so as long as they can block
unwanted brands.1. But Bing promises
to help users by allowing them to chat
to bots that appear after the user
starts their search. Instead of simply
typing keywords the user will answer
questions from the bot that refine
and guide the search. This technology
promises to make search prompted and
conversational. Watch this space – chat
could revolutionise the way consumers
search for products, creating new
opportunities for native advertising.
4. There was a lot of talk about
augmented reality (AR) in 2017 – along
with virtual reality, AR may finally be
ready to live up to its promise. Facebook
and Snapchat launched platforms in
late 2017 and both companies want to
incorporate ads. AR is a technology to
keep an eye on rather than an urgent
priority but things are moving. Carmakers
are committing substantial resources.
Audi is showing customers round its
vehicles stationed on the moon, and BMW
lets the user experience its cars and see
which dealers have them in stock. If we
are going to experience the world through
headsets or glasses, it’s time to start
talking to platforms and to experiment
with how native ads can work on these
highly engaging formats.
CREATIVE
We are spending more of our lives on
visually led smart devices – so producing
the best visual content, consistent across
platforms, is essential. Yet many brands
and retailers are not ready to do so.
 Kenshoo Whitepaper l 9

GOING NATIVE

Creative content is often poorly organised
and in the wrong formats. Here are three
key ways to get your creative content
ready for the native age:
1. Break down barriers: many brands
and retailers work with their website,
marketing, merchandising and content
teams operating in silos. This model
doesn’t work in a market where
full-funnel marketing is possible and
consistency across platforms is essential.
Kenshoo reports that clients are getting
their acts together. A global publisher
has created a role whose job is to
bring together creative in different
parts of the organisation. At a large
retailer, the social team now liaises with
merchandising and other divisions to
encourage a flow of ideas.
2. Get formatted: there is no shortage of
creative – companies report they have
more than they know what to do with.
But too often it is in yesterday’s formats.
Static images don’t engage users when
they experience so much great video
content. To grap someone’s attention
on their phone without intruding, you
need to be snappy – and that means
less than a minute. Yet too many brands
fall back on 60-second videos that are a
turn-off. This doesn’t mean all existing
creative has to be scrapped. It needs to
be customised to the requirements of
successful native advertising. Companies
such as Shuttlerock and Idomoo can help
brands generate dynamic content from
static images or carve up 30-second or
60-second ads into shorter segments
that are tailored to different customers.
has worked – even though it doesn’t
tell us why that click was made. Things
are finally changing. Attribution will
remain part of the mix because clicks
and conversion are easily measured. But
you need to test to untangle correlation
and causation. This is becoming possible
through what’s called incrementality:
comparing geographies and audiences
to see whether marketing is having an
impact. It has been hard to scale this
kind of activity but technology promises
to make it easier to standardise and
cheap enough to run these tests as
part of everyday business. Additional
information should in turn make it easier
to plan, forecast and allocate to generate
better returns from your budget across
channels. Then you need to execute to
take advantage of opportunities that
emerge and respond when campaigns
are successful or need something new.
1.
From a Kenshoo survey: Mobile messaging apps:
an opportunity for brands, December 2016.
2.
Kenshoo Digital Marketing Snapshot, Q4 2017

MEASURING SUCCESS
Once you have these assets, you need
to test them. Advertising with the new
digital publishers removes much of the
guesswork that went into advertising a
decade ago because they increasingly
know what individual consumers are
looking for. It’s therefore both easier and
essential to measure success in a way
that was not possible before.
Yet, for all the advances made in the
past decade, methods for measuring
success have barely moved on. Although
everyone knows it is flawed, last-click
attribution remains the most commonly
used means to test whether a campaign
10 l Kenshoo Whitepaper

GOING NATIVE

Our survey
To assess how ready the market is ACTIVE IN PAID ADVERTISING
for the shift to native we asked more
SOURCE: 2017 INTERNETRETAILING SURVEY
than 80 retailers for their opinions.
The results suggested a reasonable 75%
awareness of native advertising but
limited preparedness for the shift that
is taking place.

“How high is an awareness of native 64%

advertising within your business?” Our
respondents scored this question at an
average of 6/10, where 10 corresponds
to “completely aware”.
Native has existed in the digital world for
more than a decade and has been hotly
debated over the past few years. Given
the changes outlined in this whitepaper,
awareness needs to be higher.

“To what extent does your digital 38%

advertising activity work coherently and
34%
strategically across all channels?” Our
respondents scored this question at an
average of 3/10, where 10 corresponds to
“a single, seamless approach”.
25%
This low score isn’t all that surprising. As
discussed in this whitepaper, the industry
is siloed in terms of internal organisation
and its approach to different channels.

“I think our business would benefit

from improved integration across digital 10%
channels” Our respondents scored this
question at an average of 4/10, where 5%
10 corresponds to “strongly agree”.
This result is more concerning. It
suggests many retailers remain content
Instagram
Facebook

Snapchat

Pinterest

to carry on as before when the world is

Twitter
Google

Bing

changing around them.

“Where do you stand with regard to the
following advertising channels?” The
graph in the right-hand column shows
where retailers are currently active with
their advertising.
These figures show respondents relying
heavily on established digital channels,
yet young consumers are active on newer
platforms such as Instagram, Snapchat
and Pinterest, which is emerging as an
increasingly influential search channel
for purchases.

Conclusion
Editor: Sean Farrell
Editor-in-Chief: Ian Jindal
Design: Marzena Zychowicz
Publishing Director: Chris Cooke
Commercial Director: Andy James
andy@retailx.net
Account Director: Marvin Roberts
marvin@retailx.net
Tel: 020 7933 8999
InternetRetailing
Media Services
52-54 Gracechurch Street
London, EC3V 0EH
ISSN 1759-0582
For circulation enquiries contact:
Internet Retailing Media Services Ltd,
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Thatcham, Berkshire
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Tel: 01635 879361
Fax: 01635 868594
internetretailing@circdata.com
No part of this circulation may be
reproduced, stored in a retrieval
system or transmitted by any
means without the publisher’s
permission. The editorial content
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the views of the publisher. The
publisher accepts no responsibility
for any errors contained within
the publication.
Published globally by
InternetRetailing Media
Services Limited.
Data supplied by RetailX.
www.retailx.net
www.internetretailing.net
Kenshoo Whitepaper l 11
GOING NATIVE
It’s easy to forget that the smartphone
did not come of age until as recently
as 2007, the year when Apple released
the first iPhone. Now, a decade on, the
smartphone has become an indispensable
technology that has transformed the
way we interact and consume. It has
also caused a power shift from myriad
traditional media companies to a small
number of global digital channels.
This shift in technology, media and
human behaviour requires a fundamental
change in how brands and retailers seek
to reach consumers. For a generation
that doesn’t like being sold to, native
advertising lets you become part of their
interaction in the digital world instead
of intruding on it.
Companies that succeed in this
transformed market will embrace the
idea of the ad as a digital storefront
working seamlessly across platforms.
That means offering engaging content
that helps and informs the consumer
instead of selling to them.
The good news is that the digital giants
are building infrastructure that lets you
connect with these consumers on their
platforms. The difficult part is keeping up
with their level of innovation, and being
prepared to reshape your business and
content to meet the requirements of
the digital world. Amazon has entered
the game, and it promises to reshape
the market with its reach and financial
power. But the emergence of Snapchat,
Instagram and others demonstrates how
fluid the market is.
We hope this whitepaper has given you
food for thought and ideas for where to go
next. The opportunities are out there and
there is still time to go native.
 www.internetretailing.net
Download at: http://etail.li/GoingNative

InternetRetailing whitepaper in conjunction with Kenshoo | March 2018